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Wednesday, January 19, 2011

Will the Supreme Court Let Drug Companies Overcharge for Medication?

The Supreme Court will hear arguments today in Astra USA v. Santa Clara County. At stake is whether a health care provider can bring suit against drug companies to force them to abide by a federal contract on medication pricing.

Federal law instructs the Secretary of Health and Human Services to enter into contracts with drug manufacturers to offer discounted prices for medication to public hospitals, community health centers and other safety-net health care providers. Santa Clara County, California, which operates several of these providers, claims that drug manufacturers breached their contract by charging providers more than the contracts allow. Santa Clara argues that as the intended beneficiaries of the contracts between the government and the drug manufacturers, the health care providers should be allowed to sue to enforce the contract. This would ensure lower drug prices in situations where the federal government, for whatever reason, has chosen not to sue to enforce the contract's terms.

An editorial in today's New York Times reviews the court's recent history of siding with corporations over individuals, especially in cases -- like this one -- where the corporation has hired former solicitors general to help make their cases.

If the Supreme Court sides with Astra USA, drug manufacturers will have less incentive to abide by their contractual obligations. This is yet another case where the Supreme Court's ruling could have profound benefits for big corporations, and profound harm for individuals. What's unclear is why the Corporate Court has taken this case, since Santa Clara prevailed in the Ninth Circuit, and there is no division on this issue from another federal circuit court.